Nirmala Sitharaman, India's Finance Minister, announced the Union Budget 2020 in her speech at the Parliament on 1st February. In this video, we take a look at what this year's budget means for the Indian Startup Ecosystem.
0:20 What does the Union Budget 2020 mean for the Indian startups
2:33 How will the Union Budget 2020 affect the Micro, Small and Medium Enterprises (MSMEs)
5:30 How the Union Budget 2020 will affect the investors in the Indian Startup Ecosystem
What does the Union Budget 2020 mean for Indian startups: Firstly, under the Startup India campaign, startups with a turnover of INR 25 crores (250 million) were eligible for a tax holiday for a period of three years out of the seven years of operations. In the latest budget, the government has proposed to increase this number from seven to ten years, in order to help the startups, considering they fail to generate profits in their early years. Furthermore, In order to benefit the larger startups, the turnover limit will be raised to INR 100 crores (1 billion). Moving on to the second important update, the finance minister has proposed to defer the tax payment on the Employee Stock Option Plan (ESOP) to five years. ESOPs are being increasingly used by the startups to retain talented employees during their early years. However, these employees were burdened with taxes at the time of signing up for these ESOPs and were also required to pay the capital gains tax whenever they chose to redeem them. This not only created a tax burden on employees but also slowed the growth of the entire startup ecosystem. The employees will now have to pay the tax either after the five year period or after leaving the company or after selling their shares. The government has eased the tax burden of employees working at startups with this move. Thirdly, the government will be setting aside INR 8,000 crores (80 billion) over the next five years through the National Mission on Quantum Technologies and Applications. These funds will be used to boost the growth of Quantum Technology and startups working in this domain. The government hopes to make India a leader in this technology by encouraging startups to find practical applications for the technology across domains. Finally, the government is also planning to set up a digital platform to make the filing of Intellectual Property Rights (IPR) easier and seamless.
How will the Union Budget 2020 affect the MSMEs: Focusing on the manufacturing sector, the government is set to introduce schemes that will boost investments in the electronics manufacturing industry with a focus on mobile phones, electronic equipment and semiconductor packaging. Furthermore, another similar scheme focused on manufacturing medical devices will also be floated. This not only has the potential to create more jobs in the manufacturing industry but could also make India a leader in electronics manufacturing in the world. Next, the Import and Export industry has a huge impact on MSMEs. The government wants to introduce the National Technical Textiles Mission with an outlay of INR 1,480 crores (14.8 billion). Considering India imports technical textiles to the tune of $16 billion every year, the government hopes to reverse the trend through its new scheme. Moving on, to further make exports easier for Indian MSMEs, NIRVIK scheme will be launched to provide higher insurance coverage, reduction in premium and simplified procedure for claim settlements for the businesses. In order to help the Indian exporters scale their business globally, handholding support will be provided for select sectors including pharmaceuticals and auto components to provide them with the latest technology and business strategy. The Modi government will be launching a 1,000 crores (10 billion) scheme for this purpose. While INR 100 crores (1 billion) will be put in by EXIM Bank and SIDBI to help with equity and technical assistance, another INR 900 crores (9 billion) will be offered as debt through banks. So far, businesses with a revenue of INR 1 crores (10 million) are required to get audited by an accountant. In the latest budget, the government has proposed to increase this limit by five times to INR 5 crores (50 million), however, this increase in limit will only be applicable for businesses that carry out less than 5% of their transactions in cash. This change will not only benefit the MSMEs but also give them an incentive to move towards digital transactions, moving India towards a cashless economy.
How the Union Budget 2020 will affect the investors in the Indian Startup Ecosystem: Providing a huge relief to the investors and making India more attractive for them, the government is letting go of Dividend Distribution Tax (DDT).
You can catch the entire Union Budget 2020 speech by Nirmala Sitharaman: [ Ссылка ]
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